[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]






                THE PRESIDENT'S FISCAL YEAR 2011 BUDGET

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 3, 2010

                               __________

                           Serial No. 111-41

                               __________

         Printed for the use of the Committee on Ways and Means


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20402-0001







                      COMMITTEE ON WAYS AND MEANS

                 CHARLES B. RANGEL, New York, Chairman

FORTNEY PETE STARK, California       DAVE CAMP, Michigan
SANDER M. LEVIN, Michigan            WALLY HERGER, California
JIM MCDERMOTT, Washington            SAM JOHNSON, Texas
JOHN LEWIS, Georgia                  KEVIN BRADY, Texas
RICHARD E. NEAL, Massachusetts       PAUL RYAN, Wisconsin
JOHN S. TANNER, Tennessee            ERIC CANTOR, Virginia
XAVIER BECERRA, California           JOHN LINDER, Georgia
LLOYD DOGGETT, Texas                 DEVIN NUNES, California
EARL POMEROY, North Dakota           PATRICK J. TIBERI, Ohio
MIKE THOMPSON, California            GINNY BROWN-WAITE, Florida
JOHN B. LARSON, Connecticut          GEOFF DAVIS, Kentucky
EARL BLUMENAUER, Oregon              DAVID G. REICHERT, Washington
RON KIND, Wisconsin                  CHARLES W. BOUSTANY, JR., 
BILL PASCRELL, JR., New Jersey       Louisiana
SHELLEY BERKLEY, Nevada              DEAN HELLER, Nevada
JOSEPH CROWLEY, New York             PETER J. ROSKAM, Illinois
CHRIS VAN HOLLEN, Maryland
KENDRICK B. MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
DANNY K. DAVIS, Illinois
BOB ETHERIDGE, North Carolina
LINDA T. SANCHEZ, California
BRIAN HIGGINS, New York
JOHN A. YARMUTH, Kentucky

             Janice Mays, Chief Counsel and Staff Director

                   Jon Traub, Minority Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
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                            C O N T E N T S

                               __________

                                                                   Page

Advisory of January 27, 2010, announcing the hearing.............     2

                                WITNESS

The Honorable Timothy F. Geithner, Secretary, U.S. Department of 
  the Treasury...................................................     4

 
                THE PRESIDENT'S FISCAL YEAR 2011 BUDGET

                              ----------                              


                      WEDNESDAY, FEBRUARY 3, 2010

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:00 a.m., in 
room 1100, Longworth House Office Building, Hon. Charles B. 
Rangel (Chairman of the Committee), presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
January 27, 2010

               Chairman Rangel Announces a Hearing on the

                President's Fiscal Year 2011 Budget with

                    U.S. Department of the Treasury

                     Secretary Timothy F. Geithner

    House Ways and Means Committee Chairman Charles B. Rangel today 
announced the Committee will hold a hearing on President Obama's budget 
proposals for fiscal year 2011. The hearing will take place on 
Wednesday, February 3, 2010, in the main Committee hearing room, 1100 
Longworth House Office Building, beginning at 10:00 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be limited to the invited witness, the 
Honorable Timothy F. Geithner, Secretary of the Treasury. However, any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

FOCUS OF THE HEARING:

      
    On February 1, 2010, President Barack Obama will submit his fiscal 
year 2011 budget to Congress. The budget overview will detail his tax 
proposals for the coming year, as well as provide an overview of the 
budget for the Treasury Department and other activities of the Federal 
Government. The Treasury plays a key role in many areas of the 
Committee's jurisdiction, including taxes and customs.
      

BACKGROUND:

      
    In announcing the hearing, Chairman Rangel said, ``Developing a 
budget is a difficult challenge at a time when we need to continue our 
efforts to create jobs and strengthen our economy even as we face 
increasing concerns about our long-term fiscal outlook. I have enjoyed 
working with Secretary Geithner over the past year and look forward to 
hearing him discuss how the President proposes to meet those 
challenges.''
      

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    Chairman RANGEL. The Ranking Member and I have been trying 
to find some way that we can move this forward. The Secretary 
of Treasury has a limited amount of time. We hope that the 
Members would agree to a 3-minute limit in terms of 
questioning, and we will stick to it. We want everyone to have 
an opportunity to ask a question.
    We expect a battery of votes on the floor in a couple of 
hours. And so I yield my opening statement to the Ranking 
Member, Mr. Camp.
    Mr. CAMP. Well, Mr. Chairman, in that spirit I will submit 
my opening statement for the record so that we can leave more 
time for questions by Members on the Committee, and I 
appreciate the opportunity to move forward. Thank you, Mr. 
Chairman.
    [The prepared statement of Mr. Camp follows:]
                    Prepared Statement of Dave Camp,
              Ranking Member, Committee on Ways and Means
    Thank you, Mr. Chairman, and welcome back to the Committee, Mr. 
Secretary.
    Today we begin our annual cycle of hearings on the President's 
budget proposals and their effects stretching out for the coming 
decade. As usual, we will have many specific questions about what the 
Administration plans in terms of spending and taxes, and why.
    But before we get to the specific questions about the individual 
proposals in here, a larger question looms in the minds of tens of 
millions of Americans.
    Where are the jobs?
    Last year at this time, President Obama and Democrats in charge of 
Congress were putting the final touches on their so-called stimulus 
plan. And in selling that plan, they made all sorts of promises about 
the jobs it would create and the beneficial impact it would have on the 
unemployment rate.
    Everyone is, of course, entitled to their opinions. But facts are 
stubborn things. And the facts, quite clearly, show the promises made 
by this Administration about stimulus were more than a little off the 
mark.
    Instead of creating 3.5 million jobs as Democrats promised, we have 
since witnessed the elimination of nearly 3 million more jobs.
    As we can see from the chart on the screen, we were told 
unemployment would stay below 8 percent if stimulus passed. Yet 
unemployment is now 10 percent, and the President's budget admits it 
will stay there throughout 2010.
    Instead of more paychecks, the lasting legacy of stimulus may be 
measured more by the spike in the number of people collecting 
unemployment checks. A record 12 million Americans recently claimed 
unemployment benefits, almost 50 percent more than the 8 million when 
Congress passed stimulus.
    Today, 10 months after stimulus, 49 of 50 States have lost jobs, 
representing another promise made, but not kept, in selling this debt-
bloating behemoth to the Nation.
    Other promises, such as those claiming most job creation would be 
in the private sector or that construction and manufacturing would 
benefit especially, have been shown to be equally off the mark.
    These are not empty assertions. These are all painstakingly 
documented and can be found on the website of Ways and Means Committee 
Republicans.
    Further proof of the failures of stimulus can be found in last 
week's report by the Congressional Budget Office, which found stimulus 
actually cost taxpayers $75 billion more than originally forecast, in 
large part because the failure to create jobs drove up spending on 
unemployment and other Federal benefits.
    This is the sobering context in which we will consider today's 
budget. Simply put, it proposes the highest spending, largest tax 
hikes, and biggest deficits in American history. Meanwhile, the 
Administration claims these steps are necessary to spur job growth in 
the coming decade.
    And that really leads us to a more basic question. If the nearly $1 
trillion added to our debt by stimulus didn't spur job creation this 
year, why should we expect that adding another $9 trillion in debt over 
the next decade--as this budget proposes--will improve things?
    I look forward to a discussion of how the specifics in the 
President's budget will actually create real jobs. Not ``jobs funded'' 
or ``jobs temporarily saved until stimulus money runs out'' or whatever 
else someone would like to count. But real, lasting jobs in 
profitmaking companies that are selling goods and services to our 
fellow Americans and customers around the world.
    Because for people across the country, especially those I represent 
in Michigan where the unemployment rate is over 14 percent today, ``How 
does it create jobs?'' is the first, middle, and last question on their 
minds.
    Today, I will be looking for answers to these questions from the 
Administration. I thank the Chairman and yield back the balance of my 
time.

                                 

    Chairman RANGEL. Mr. Geithner, we will waive opening 
remarks and go right into your testimony.

         STATEMENT OF TIMOTHY F. GEITHNER, SECRETARY, 
                U.S. DEPARTMENT OF THE TREASURY

    Secretary GEITHNER. Chairman Rangel, Ranking Member Camp 
and Members of the Committee, it is a pleasure to be back here 
today.
    A year ago, as you know, when the President took office, 
our Nation was facing a deep recession. The economy was 
contracting at an annual rate of about 6 percent. The financial 
system was on the verge of collapse. Credit was frozen. The 
housing market was in free-fall. Millions of Americans had lost 
their jobs, and the economy was losing jobs at the rate of 
three-quarters of a million additional jobs a month. And this 
is very important: When the President came into office, he 
faced a deficit of $1.3 trillion and projected deficits before 
a single bill was enacted that, according to CBO, would more 
than double the Nation's debt over the next decade.
    I want to just say this again: In January 2001, CBO, which 
is your designated nonpartisan, neutral scorekeeper, projected 
10-year surpluses of $5.6 trillion. In January 2009, before the 
President stepped into office, those projected surpluses turned 
into $8 trillion in projected deficits. So let me just repeat 
that. Over the course of 8 years, we went from the summits of 
$5.6 trillion in projected surpluses to $8 trillion in 
projected deficits. That is a swing of $13 trillion.
    Now, this recession caused tremendous damage, and today 
millions of Americans are still living with the consequences of 
that recession. And we all know that the road to jobs, to 
greater economic security and to fiscal responsibility starts 
with economic growth. And today, in large part due to the 
actions Congress took and that we took to put out this 
financial fire, our economy is now growing again, and in the 
fourth quarter it grew at the fastest rate in 6 years.
    This is progress, but it is not enough, and that is why we 
need to work together to intensify our focus together on job 
creation, on investment and on innovation.
    Now, when you talk to small businesses across the country, 
as I know you do, they tell a similar story. They are worried 
about whether they are going to see demand for their products, 
and their ability to expand and to hire depends on access to 
credit. And that is why the President in New Hampshire 
yesterday proposed new legislation to create a small business 
lending fund. That new fund will offer capital to community 
banks that have historically been at the center of lending to 
small businesses, and we need them if we are going to be able 
to grow and create jobs. That is why the President is also 
proposing to substantially expand what the Small Business 
Administration can do in terms of higher loan limits, lower 
guaranteed fees. We want to extend the Recovery Act provisions 
and build on those.
    Now, in addition to helping small businesses get access to 
credit, we are proposing extensions of Recovery Act tax relief 
for small businesses. Expensing, bonus depreciation, we are 
proposing zero capital gains on investments to small 
businesses, and we want to work with you to design a credit to 
help small businesses expand hiring. The President's proposal--
and we are open to ideas on how best to do this--is to give 
small businesses that add jobs $5,000 for each net job they 
create, and combine that with some payroll tax relief.
    Now, in the President's budget we laid out a comprehensive 
agenda to invest in innovation and strengthen our economic 
foundation. This budget is designed to create the conditions 
for the private sector to grow so that businesses small and 
large can create jobs. To do this we need serious financial 
reform not just to provide better protection for consumers and 
investors, but to make sure that our financial system is taking 
the savings of Americans and financing future growth and 
innovation, not financing financial and real estate booms.
    We want to encourage American innovation. Last year we made 
the largest investment in basic research funding in the history 
of our country, and we want to build on that and give 
businesses incentives to invest in R&D and in clean-energy 
technologies.
    We need to increase exports, and that is why we are 
committed to working with this Committee and with the Congress 
to pursue strong trade agreements, because the more American 
businesses are able to export, the more jobs they are going to 
be able to create in America.
    We want to invest in education. Businesses in this country 
need an education system that does a better job of teaching and 
creating a skilled and productive workforce.
    And finally, we need health care reform so that we can 
provide greater economic security for tens of millions of 
middle-class families and help reduce the extraordinary cost 
burden our existing health care system puts on businesses large 
and small.
    Now, these are reforms the government has to make. If the 
government fails to meet these basic challenges, Americans will 
suffer, and businesses will suffer. The market cannot solve 
these challenges on its own. The government needs to address 
these challenges in order to provide a strong foundation for a 
dynamic, growing private sector.
    Now, part of this foundation requires returning as a 
country to living within our means. When we have strong growth 
in place, we need to begin the process of bringing down our 
deficits. These deficits are too high. They are unsustainable. 
And the American people and investors around the world need to 
have the confidence that we are going to work together to bring 
them down when the economy is stronger.
    Now, the President's budget proposes some important steps 
toward that objective. Starting in fiscal year 2011, we propose 
to cap nonsecurity discretionary government funding for 3 
years. Second, we are proposing some important changes to our 
tax system to make it fairer and help bring down those long-
term deficits. So we are proposing to allow the tax cuts put in 
place for the richest Americans to expire to close what is 
called the carried interest loophole so that we are taxing the 
income of hedge fund and private equity managers in the same 
way we tax the earnings of teachers and firemen, and we want to 
eliminate unnecessary, unfair and ineffective tax subsidies.
    As we take these modest steps, though, we want to expand, 
extend the Making Work Pay tax credit, which goes to 95 percent 
of working families across the country. We are working to close 
down the TARP at zero cost to the taxpayer. If you join with 
the President in passing our proposed financial responsibility 
fee, the taxpayer will not be exposed to a penny of loss on the 
actions the government was forced to take to fix the financial 
system.
    Third, we have to restore basic disciplines of budgeting 
that all American families live with by reinstating pay-as-you-
go. Any new initiative should be paid for without adding to the 
deficit. In the 1990s, those disciplines helped move us from a 
deficit that was 4.5 percent of GDP in 1991 to a substantial 
surplus in 2000. Now, this budget outlines a path to bring our 
deficits down as a share of our economy to below 4 percent over 
the next several years. And while government support for the 
economy is critical now, we can't let our future deficits and 
debt continue to grow faster than our economy without hurting 
future prosperity.
    This is going to be a difficult task, it is going to 
require tough choices, politically difficult choices, but it is 
important we work together on that. And that is why the 
President has proposed the creation of a bipartisan fiscal 
commission which will be charged with identifying responsible 
policies that can win support across the aisle to bring down 
these deficits.
    I want to just close by saying the following: The United 
States economy is in a much stronger position today than it was 
a year ago, but our challenge is not just to repair the damage 
caused by this recession. We also have to make the investments 
that are necessary to our future prosperity. We have not been 
investing in making the kind of reforms that are essential to 
broad-based economic growth in this country, and that is why 
the investments laid out in the President's budget are so 
important.
    Now, I know we have different ideas on how best to get the 
economy growing again and make sure we are creating jobs, but I 
want to underscore where I think you can find some common 
ground today. People across the aisle today say deficits 
matter, and ours are too high. Tax cuts are not free. We have 
to pay for the programs we propose to undertake. But our 
priority today, our priority today, is to make sure we are 
getting Americans back to work and we have the conditions in 
place for a sustainable recovery. Now, I want to say I look 
forward to working with this Committee on how best to design 
and implement policies that achieve that objective.
    And I want to conclude, Mr. Chairman, just by saying one 
thing about what you read in the news today about AIG. What 
hap- 
pened in AIG was an outrageous failure of policy. As a country 
we should have never let a company take on a scale of risk that 
could threaten the stability of the financial system, and we 
should never allow the taxpayers ever again to be in a position 
where they have to pay a penny for rescuing a financial system 
from the mistakes caused by not just government, but the 
decisions of people running these major firms.
    Part of what contributed to this was a set of compensation 
practices that defied gravity; they were deeply responsible. In 
a simple way what happened is people were paid if things went 
well, but they were not exposed to loss if things went bad. And 
what happened in AIG is the people running that firm, as they 
were taking on a level of risk we had not seen ever before, 
they had it--they were paying their people on a presumption 
that they would share in the gains if things turned out fine, 
but if things went south, they would be protected from those 
losses. These contracts were put in place in December 2007, and 
in March 2008, before that company faced collapse, they came to 
the government and said, we need you to help us save us from 
ourselves.
    Those contracts were outrageous. They should never have 
been permitted. And Ken Feinberg has done an exceptional job 
under very tough conditions. I asked him to come and help us 
work through this. He is a brave, smart, tough man, who knew he 
was not going to make anybody happy, and he did a very good job 
of negotiating down those payments and trying to make sure that 
you did not have any of that kind of stuff in place in that 
firm or across our major firms in the future.
    Now, if you join with us in passing this proposed fee on 
our largest financial institutions, then you will be able to 
say, as we do, that the American taxpayer will not pay a penny 
for what happened in AIG. And if you work with us on financial 
reform, then we can put in place the kind of bankruptcy 
procedure we have for real companies and we have for small 
banks that allow us to deal with future AIGs without having to 
face the kind of outrageous things you have seen us have to 
confront in this process.
    So our job today is to see if we can find a way to fix what 
was broken in this economy and in this financial system. We are 
making some progress, but we have a ways to go. And we are 
looking for the best ideas that offer the best bang for the 
buck to get people back to work that are responsible, recognize 
we have limited resources, but understand the deep obligation 
we have to try to repair what was broken, repair all the damage 
that was done, and put us back on a path where we can be more--
we have earned back the confidence of the American people that 
they are going to have a more secure economic future.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Thank you, Mr. Secretary.
    [The prepared statement of Secretary Geithner follows:]



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman RANGEL. Well, you have said it all. I am going to 
yield to Mr. Camp. But I think it is abundantly clear that in 
addition to having incentives, we have to find some way to 
provide confidence to the people out there, especially our 
small businesses. Let us see where we do have a common ground.
    I am going to ask Mr. Camp to consider his staff working 
with the House, analyzing, as we will, the President's proposal 
to see what parts of it are acceptable, because the misery, the 
pain that is going on out there is not Republican, it is not 
Democrats, and I think they are looking for some degree of 
unified support.
    So we are going to give it our best try, Mr. Camp and I, 
and we do hope your office would share with us experts to help 
us to get through the political problems that unfortunately we 
face. I thank you for your testimony, and I yield to Mr. Camp.
    Mr. CAMP. Well, thank you, Mr. Chairman. And obviously we 
will do everything we can to be working on all of these issues 
facing certainly our country at this difficult time. But I want 
to thank you for being here, Mr. Secretary, and for the 
opportunity to really have a hearing on the President's 2011 
budget. And it appears from my reading of the budget that the 
President is calling for about $2 trillion in tax increases, is 
that correct, as a total number?
    Secretary GEITHNER. Well, here is how I would say that----
    Mr. CAMP. Well, I think it is.
    Secretary GEITHNER. What we are proposing to do is allow it 
to expire.
    Mr. CAMP. I really would like to get your comment.
    Secretary GEITHNER. We are proposing to allow to expire the 
tax cuts that affect 2 to 3 percent of the richest Americans in 
the country. We think that is fair, we think that is just. But 
we are extending very important tax cuts for the vast bulk of 
Americans, vast bulk of American businesses. And these are 
powerful, very powerful, responsive tax cuts. They are good 
policy. We should work together to make sure those happen.
    Mr. CAMP. And I notice that the budget does not factor in 
the House-passed national energy tax. And if you did factor 
that into the budget, the total number would be closer to 
really about $3 trillion in tax increases in the budget. So 
last year I look at the increase in spending by about 84 
percent in last year alone, and since the Democrats came into 
the Majority, the debt limit has increased by 60 percent, and 
now you want to pay for all that spending and all of that debt 
with about $3 trillion in new taxes if you add in the 2--plus 
the $1 trillion cap-and-trade.
    Secretary GEITHNER. No, Mr. Camp, I don't think that is----
    Mr. CAMP. And those new taxes on small businesses, on 
working Americans' health benefits, and also, as I said, taxes 
on energy.
    Now, I understand the President has called for about $30 
billion to help small businesses, and on the surface I think 
that sounds pretty good. But as I look at the President's 
budget, his tax increases would hit small businesses 
particularly hard, because you are increasing taxes on nearly 
half of all small business income, 44 percent according to the 
Joint Tax Committee. So under the President's plan, small 
businesses would pay an additional $10 billion in taxes in 2011 
alone, and a total tax increase over the 10-year period of $259 
billion. So it seems to me that $30 billion in help pales in 
comparison to the $250 billion in tax increases.
    Secretary GEITHNER. We would welcome--if you are prepared 
to work with us to make sure we can help small businesses to 
get credit and take the resources we have saved by fixing this 
broken financial system devoted to that, that would be 
terrific. But the tax benefits of small businesses in the 
President's budget are very, very substantial and dramatic. And 
again, one very important point--and this is not our numbers--
letting the tax cuts on high-income Americans expire affects 
only 2 to 3 percent of American small businesses, 2 to 3 
percent.
    Mr. CAMP. I see my time has expired.
    Secretary GEITHNER. But the tax benefits we are proposing 
to give them are very, very substantial, and we hope you will 
join with us in making those permanent and extending those 
incentives.
    Mr. CAMP. Well, I will just say in light of the private-
sector job losses announced this morning, further job losses in 
January, I don't see how raising taxes will have the effect of 
leading to job creation. And when you look at the total tax 
relief versus the total tax increases, it is a significant tax 
increase particularly on small businesses.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Levin.
    Secretary GEITHNER. Can I just respond to that last point?
    Chairman RANGEL. Okay.
    Secretary GEITHNER. I just want to do it one more time just 
to say historically. I have been in public service all my life. 
My first job in public service was the Treasury Department, 
first under Secretary Jim Baker. Lloyd Bentsen gave me my first 
job, my first senior job, in Treasury. When I left the 
Treasury, at that point CBO and OMB projected $5 trillion, more 
than $5 trillion in surpluses. When the President came into 
office, that had shifted to an $8 trillion deficit.
    Now, there is nothing fair, responsible or good for 
business in that swing. Now, we are in a deep hole that we did 
not create; we are trying to dig out of it. Love your help in 
trying to dig out of it, but it requires that we would be 
growing again and get people back to work. And we are willing 
to work with you on how best to do that, but our priority is 
again to fix what was broken, make sure we have an economy that 
is growing, people are back to work. If we do that well, then 
we are going to be in a better position to help dig ourselves 
out of this fiscal hole.
    Mr. CAMP. Well, where I come from, when you are in a hole, 
you stop digging. And I look at the tax increases, the debt, 
the spending, and particularly the way it is going to fall on 
small business, I don't see the help there. But I would like 
to--I mean, the purpose of this hearing is to really highlight 
these provisions and see where we can maybe find ways to move 
ahead and help certainly get jobs started again in this 
country. Thank you.
    Chairman RANGEL. Will the clerk please start the clock over 
for Mr. Levin.
    Ms. SCHWARTZ. Will you just yield for one moment for a 
point of clarification? I just want to be clear about the 
numbers. This came up yesterday in the Budget Committee, that 
there is a new category now called ``Democratic control 
budgets.'' And so what the Republican side is doing is putting 
the last 2 years of the Bush Administration deficits onto us.
    Chairman RANGEL. Mr. Levin will proceed.
    Mr. LEVIN. I am glad--look, I think we need to try to find 
common ground, but it won't work if people try to escape from 
the past. And I think everybody needs to remember the sentence 
you read, simply put, over $8 trillion of the projected 
deficits we faced as we put together the budget were due to the 
fiscal policies of the last 8 years and the effects of the deep 
recession this President inherited.
    I want to ask you then, Mr. Camp talked about the impact on 
small business, and when they do that, they talk about the 250 
category, $250,000, and maintaining--not maintaining the tax 
cut for those people, and they include everybody, lawyers, et 
cetera. Repeat for us the impact, if you would, Mr. Secretary, 
of not continuing the tax cut for wealthy Americans. Who is hit 
by that?
    Secretary GEITHNER. Roughly 2 to 3 percent of individuals 
and roughly 2 to 3 percent of small businesses.
    Mr. LEVIN. Okay. That is a fact.
    Now, also there has been opposition for the fee on 
financial institutions. Say a word about why the Administration 
is proposing that.
    Secretary GEITHNER. The law Congress passed to give the 
executive branch the authority to fix this financial mess 
required the Secretary of the Treasury to propose a way to 
recoup any losses so that the American taxpayer was not having 
to shoulder the burden. So what we did is a simple commonsense 
thing, is propose a fee on our largest banks that benefited the 
most from the actions we had to take to fix the financial 
crisis, designed in a way that operates like a fee on risk or a 
fee on leverage. It is a simple--it is fiscally responsible, it 
is fair, it helps make the system stable if it is designed 
well.
    Mr. LEVIN. Okay. And I hope as we search for common ground, 
those on the Minority side will indicate their position on 
that.
    And the same on the $30 billion for community banks. Just 
sum up quickly why you suggest we do that and why you suggest 
how we pay for it?
    Secretary GEITHNER. Community banks are responsible for 
about half of small business lending. Community banks were not 
part of the problem, but they are a necessary part of the 
solution. For them to be able to help small businesses expand 
and grow in that payroll, they need to make sure they have 
access to capital. Not all of them can raise capital in private 
markets now. So what we are proposing is a simple thing, is to 
give them capital and design it so that the more they lend, the 
more economically attractive will be that capital. Now, we are 
also proposing to expand what the SBA can do. And those two 
things alongside these tax incentives for small businesses is a 
powerful package of measures.
    Mr. LEVIN. And I hope as we search for common ground, Mr. 
Chairman, that those on the Minority side will express their 
position on that proposal. Thank you.
    Chairman RANGEL. Thank you.
    Dr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    A budget is setting the priorities of how a group spends 
their money, whether we are talking about a family, or we are 
talking about the Federal Government. And as you look at the 
situation today where everybody wants a job, and all we are 
talking about is jobs, jobs, jobs, the example of the 
priorities of Franklin Delano Roosevelt were to create jobs 
through the Work Projects Administration, through the CCC. You 
have seen the same thing over time in the seeded jobs that have 
been created. And I would like to hear you convince me that 
putting a tax credit out for small business is more effective 
than recreating some of the creation of jobs that have gone on 
in the past.
    Seattle needs a seawall. If we have a Earthquake like they 
just had in Haiti, the city will slide down into the ocean. We 
have a viaduct that is clearly a problem, as the one in San 
Francisco went down. So that the infrastructure jobs are 
everywhere around us. There are human service jobs in schools, 
in nursing homes and all kinds of places for seeded positions.
    Convince me that your balance of putting money on the side 
of small business helps for job creation--because if people 
don't have money, they don't go to small businesses to buy 
stuff.
    Secretary GEITHNER. I agree with you, and that is exactly 
well said. And that is why we have been so supportive of very 
substantial investments in infrastructure across the country. 
Now, those go directly to putting people back to work. And it 
is good for the economy as a whole as well, because as you 
know, there are parts of our Nation's infrastructure that have 
been allowed to decay and erode over time. So infrastructure 
spending, if it is well designed, and if it can move quickly, 
is very powerful and effective. And we will be very supportive 
as we work with the Senate to follow your lead in passing a 
jobs bill and making sure there is well-designed infrastructure 
spending as part of that.
    In addition, one of the most effective things we can do is 
to make sure that at the State and local level there are 
resources so that teachers can stay in the classroom teaching, 
firefighters are able to stay on the job. And those things, aid 
to first responders, helping State governments avoid having to 
make deeper cuts in the basic services, that is good policy, 
very powerful, and can operate very quickly.
    So you are right to say that tax cuts alone are not going 
to solve this problem. And you are right to say we need to do 
other things alongside that to make sure that you are doing 
direct things that can help job creation in areas where the 
country needs greater investments. But together we think that 
package could be quite powerful.
    Mr. MCDERMOTT. The tax expenditures right now are balanced 
how, infrastructure versus tax cuts?
    Secretary GEITHNER. Well, that really depends on the mix 
that Congress ultimately adopts. But in our view is--what we 
propose is that Congress set aside about $100 billion for 
additional spending right now to reinforce job creation. And we 
are suggesting only a third of that go for this new jobs-tax 
credit-hiring incentive. The balance of the rest should go to 
things that we think would also complement that, help repair 
infrastructure, help first responders, make sure we have 
teachers in the classroom, and so that is one way to cut the 
package.
    Mr. MCDERMOTT. Thank you.
    Chairman RANGEL. Mr. Herger.
    Mr. HERGER. Thank you, Mr. Chairman.
    Secretary Geithner, it has been a year now since the 
President signed a so-called stimulus bill, and Americans are 
still wondering where are the jobs. In my own northern 
California rural district, the unemployment rate is over 15 
percent. The last thing we should be doing is passing 
legislation that would make this problem worse.
    The President's budget assumes that Congress will pass a 
health care bill. The House Democrats' health care bill raises 
taxes by more than $732 billion over the next decade. Using the 
methodology developed by Christina Romer, President Obama's top 
economic advisor, these tax hikes could cost the country 5 
million jobs, something the Republicans find unacceptable. Does 
losing 5 million jobs on top of the current double-digit 
unemployment rate concern you?
    Secretary GEITHNER. Congressman, those are not our numbers. 
They are no numbers I don't think any reasonable economist 
would support. And, of course, we would not ask you to support 
programs that carried that risk, because we believe, as you 
did----
    Mr. HERGER. It is the methodology by the President's own 
advisor that calculated this.
    Secretary GEITHNER. There is not a chance that a reasonable 
independent economist would look at that package of measures 
and suggest that would be the impact over time. One thing is 
important for people to understand: Businesses today, small 
businesses, pay more for health care than large businesses. The 
burden on them in the current system is not good for business. 
They normally put it at the top of their basic concerns about 
what Washington is doing to make their lives harder.
    Our job is, and our priority is, as you said rightly, 
unemployment is just outrageously high in this country, and 
even the national number doesn't capture much higher numbers in 
districts like yours, many parts of the country. And that is 
why it is so important that we are on this and keep working to 
reinforce this. The worst thing we could do today would be to 
stand back and say, all right, we are going to hope that our 
challenge now can be best addressed by going and cutting these 
deficits dramatically today. That would be irresponsible; that 
would be fiscally irresponsible. It would make the economy 
weaker. It would not be good for the country.
    Mr. HERGER. I would like to ask you some specific tax 
increases that are in the House and Senate health care bill 
since the President's budget does not provide any details of 
what he is asking Congress to pass. Does the Administration 
support a new 8 percent payroll tax on employers who don't 
offer health insurance that meets government standards, a tax 
that could result in the loss of millions of jobs? And does the 
Administration support a tax on any American who chooses not to 
buy government-mandated insurance, a tax that would fall on 
millions of Americans making less than $250,000 per year?
    Secretary GEITHNER. Congressman, you have all spent a lot 
of time on health care this year. And, frankly, we hope you 
spend some more time because we would like to get it done. And 
if you ask businesses what they are worried about a lot, what 
they would like is to know what the rules of the game are going 
to be, they would like there to be a little uncertainty lifted, 
they would like this debate to end so that they know how they 
can basically plan it, and they would like us to lift the 
burden of cost the current system puts on them.
    So I know you spent a lot of time on this. There is a lot 
of views on both sides of the aisle, but we are committed, and 
we think it is important for the country to try to see if we 
can work together to put in place some sensible reforms that 
will reduce the rate of growth in costs, expand coverage, 
improve the quality of care, and end the huge hidden cost and 
unfairness in our current system.
    Chairman RANGEL. Mr. John Lewis from Georgia.
    Mr. LEWIS. Thank you very much, Mr. Chairman.
    Thank you, Mr. Secretary, for your presence. Thank you for 
your willingness to serve the government for so many years.
    Mr. Secretary, I am pleased to see that President Obama's 
budget continued the theme of trying to restore fairness and 
balance to our Tax Code. I also am glad to see that the 
President has taken on efforts to reduce the tax gap. Can you 
please take a moment to share with us some of the ways in which 
the President seeks to close the tax gap? And can you please 
tell us why the President believes that this is so important?
    Secretary GEITHNER. Congressman, on this issue we are 
following the lead of this Chairman and many Members of the 
Committee. I will give you one example. Our tax system today 
creates a range of incentives that encourage companies to shift 
investment and income offshore. Let me put it more starkly. You 
could have two companies operating together in a district or a 
State. If one of them shifts investment income overseas, it 
pays less in taxes. You could have a competitor keeping that 
investment here, adding jobs in the United States, pay a higher 
tax burden. We don't think that is good economic policy. We 
don't think that is fair. We want to make that a more even 
playing field. So that is one example of a set of reforms, 
commonsense reforms, that can make the system fairer that are 
good for investment in jobs in this country.
    There are different ways to do it. In many ways, again, we 
are following the lead of your Chairman and many Members of 
this Committee, and we want to build on that to make sure that 
we are making it harder for people to evade their 
responsibilities, to take advantage of loopholes in current law 
that are unfair and effective. We are proposing to end a range 
of ineffective subsidies in our Tax Code that go to oil and gas 
industries, for example. Another example I gave is on how we 
tax the incomes of hedge fund managers and private equity 
firms. We are suggesting that they should get taxed on income 
like teachers are today. Those are simple, fair things.
    We are proposing to extend Make Work Pay; goes to 95 
percent of working Americans. We want to make permanent the 
middle-class tax cuts that, again, go to 95, 97 percent of 
Americans. Again, those things we think are fair. We can do 
those in a way that is fiscally responsible. I am sure there 
are other things we can do, but we are starting with that. And 
we are carrying the responsibility of proposing ways to help 
dig ourselves out of this hole we are in, and to do it in a way 
that is going to support growth in jobs, is fiscally 
responsible and is fair, fair to the American people.
    Mr. LEWIS. Thank you very much, Mr. Secretary.
    Chairman RANGEL. Richard Neal. Sounds like tax reform to 
me, doesn't it?
    Mr. NEAL. Sounds good to me, Mr. Chairman.
    Thanks, Mr. Secretary. First, though, a word of thanks for 
including my auto IRA bill in the budget recommendation. I 
don't understand why there would be any opposition to that. It 
has been well met by community bankers. It has been well met by 
insurance agents and credit unions as well.
    I also want to say, as Mr. Lewis mentioned a moment ago, I 
appreciate the inclusion of reinsurance in your budget. I have 
lobbied that issue for many, many years. I do appreciate the 
simplicity of your proposal, but it might still allow 
significant shifting of profits offshore outside of the reach 
of the U.S. tax system.
    And incidentally, for our friends that are here today, a 
reminder: Domestic companies are upset about this. This isn't 
an issue that was brought to my attention by the AFL/CIO. This 
was offered by domestic insurance companies that want something 
done about it. They don't understand why they have to compete 
with companies who move offshore.
    In addition, Mr. Rangel has been very sincere in our effort 
to talk about tax reform, and I appreciate the time and effort 
you have put into these international tax provisions. And 
recently Chairman Rangel asked me to look into transfer 
pricing, and I have begun a study of that complex issue with 
the assistance of the Committee staff and our experts at Joint 
Tax. And I hope that we can work together on these 
international reforms, because Mr. Rangel's proposal does 
encourage companies to stay here and to prosper.
    Now, would you explain briefly the changes to international 
tax proposals as you did a moment ago, or at least to the 
followup on them and how they have changed since the last 
budget?
    Secretary GEITHNER. Again, we are trying to balance a 
simple imperative. We want to make sure there is a level 
playing field for American companies so we are not creating 
incentives to shift investment, jobs and income overseas. We 
want to do that in a way that takes account of the fact that 
American companies compete globally. We want to make sure we 
are reinforcing, not hurting that competitive position. And we 
have to balance those objectives.
    So we put out some proposals last year, again that followed 
in many ways the leadership of the Chairman and many Members of 
this Committee. We heard a lot of reaction to those. We took 
that into consideration. We narrowed the scope, in part because 
of concerns about impact and competitiveness. We made some 
additional suggestions, too.
    But I want to make the basic point, which is there are 
different ways to do this. Of course, we will work closely with 
you on this. We are open to suggestions. And we understand that 
a lot of people think you can't really do this without doing 
comprehensive tax reform or corporate tax reform, and that may 
be true, but we think these are sensible, commonsense things, 
and we would like to try to move on them.
    Mr. NEAL. Certainly you raise the issue of tax reform, and 
I hope that remains a priority with the Administration.
    And last, Mr. Secretary, could we get Treasury to submit to 
us what the cost of the war in Iraq will be? And not just the 
immediate costs that are now north of $1 trillion, but, just as 
importantly, the obligation we have to the men and women who 
have served us honorably, for our veterans hospitals for years 
and years and years to come.
    The idea that we could invade Iraq and cut taxes and use 
supplemental budgets here to masquerade the true cost of that 
obligation is part of where we find ourselves. So it is okay to 
suggest that if we are digging a hole, and we find that we 
can't get down anymore, that we should stop digging. But I will 
tell you that obligation is a very honorable obligation to pay 
for those veterans hospitals for years and years to come. So I 
hope that you could give us a realistic assessment of what that 
invasion cost and why we find ourselves in some measure with 
these deficits we have today.
    Secretary GEITHNER. A basic responsibility we have is to be 
honest and account for the costs of governing, whether it is 
meeting our national security needs or new programs that 
benefit millions of Americans, like on Medicare Part D. We need 
to make sure that we are being fair and honest about what those 
costs are. I completely support that principle. Thank you.
    Chairman RANGEL. Our veteran buddy, Mr. Sam Johnson from 
Texas.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Mr. Geithner, I would like to first express my appreciation 
for the President including in his budget legislation H.R. 690, 
which I introduced along with my colleague Earl Pomeroy, to 
remove cell phones from a listed property. It is high time we 
made this change. That is a dumb tax to begin with, and I think 
you would agree.
    Secretary GEITHNER. Thank you for saying that. And I agree 
it is something that most people are very supportive of.
    Mr. JOHNSON. Yes, sir.
    Well, I would like to begin my questions on tax credit 
proposal. I am not sure if you had a chance to read the article 
in the CNN Money entitled ``Obama, Here is $5,000, Go Hire 
Someone.'' In that article Jimmy Hughes, a small businessowner 
in my district, is quoted as saying, ``I need the money before 
I hire the people, not after I hire them.'' So according to 
him, future hirings depend on his cashflow situation, not on a 
tax credit. So how is this temporary 1-year credit going to be 
of any help to businesses?
    Secretary GEITHNER. Well, I think it can be very helpful. 
But again, let me just underscore what I said at the beginning, 
which is that the key thing is to make sure there is growth and 
demand for products people want to buy. But I think if you look 
at what is happening across the country now, it is not just the 
economy has stopped shrinking and it grew at the most rapid 
rate in 6 years last quarter, but you are starting to see now 
just the beginning of people seeing orders increase. So as that 
happens, what this will do is make it more likely that people 
add jobs in anticipation of that increase in orders. And if we 
can make them get more credit available, they will be able to 
borrow to finance that expansion.
    So this doesn't solve all problems, but we think it will 
make a real difference.
    Mr. JOHNSON. You need to fix the bank problem first.
    Let me ask a question about the President's fiscal 
commission. Are tax increases on the table for Social Security 
reform, yes or no?
    Secretary GEITHNER. Congressman, thank you for raising 
this. What we are doing is proposing to take a model that 
President Reagan pioneered in the 1983 so-called Greenspan 
Commission, and a model that Senator Gregg and Senator Conrad 
have designed, to get a group of statesmen together, step back 
from politics, see if they can find common ground on things 
that will help dig ourselves out of this hole. And you want 
them to be able to come fresh, no preconditions, and try to 
work on things that again will make sense.
    Mr. JOHNSON. The question is are you going to tax Social 
Security?
    Secretary GEITHNER. Again, I think everybody--part of this 
is saying the same thing, which is that what you want to do is 
have people come, step away from politics, take a cold, hard 
look at it, and figure out what is going to make sense and work 
and what can command bipartisan consensus. In this commission, 
our view is that you need to have Democrats and Republicans 
together recommend things that are going to work. It won't work 
if you just have Republican ideas on one side or just 
Democratic ideas on the other. These are big problems, got to 
work on them together. It is going to take a while; this is one 
way to do it.
    Mr. JOHNSON. Social Security can be fixed, but it doesn't 
need to be taxed.
    Thank you, Mr. Chairman.
    Chairman RANGEL. I would like to recognize the gentleman 
from Tennessee John Tanner.
    Mr. TANNER. Thank you very much, Mr. Chairman.
    And, Mr. Secretary, thank you for being here.
    I will be very brief. I have to run over to the floor to do 
a bill. I hope you all will talk more about the dangers that we 
face as a country if we do nothing about the structural 
deficit.
    In 2000, if you look at the website of the Treasury 
Department, revenue and expenditures were both around 19 
percent of GDP. We were basically breaking even. The second 
worst thing that happened in 2001 happened in February when the 
CBO estimated it would be a $5 trillion surplus over the next 
10 years. I remember saying at the time, I don't know what the 
price of cotton is going to be in 10 days, and they are telling 
me what is going to happen in 10 years. And we all know what 
happened after June of that year, 2001, when the economic game 
plan for the country was enacted, and in September we had 9/11, 
and every assumption that went in the conclusion of a $5 
trillion surplus was no longer valid.
    And what happened during this entire decade is that the 
Administrations and Congress have not gone back and revisited 
the fact that since that time, revenue has never been as much 
as 19 percent of GDP, and expenditures have never been less 
than 20 percent. Like the war in Afghanistan and Iraq, we 
borrowed money. Never before been done. It is a structural 
deficit. And this palaver about, well, we will just cut 
spending here and there, and that will take care of it, all of 
us know is not possible financially, unless 2 and 2 somehow 
don't equal 4 anymore.
    What I would ask that you do--and I applaud you for the 
commission. I told somebody the other day the way this Congress 
operates, and has since basically I have been here 21 years, is 
no matter who is in charge, we would still have pony express 
stations open in Wyoming if it was up to Congress, and we 
didn't have a BRAC Commission for defense spending. And the 
temptation here is to put off the tough decisions, but we are 
rapidly, as you know, reaching a point where we cannot any 
longer do that.
    So I just want to thank you for what you are doing. But I 
think the more emphasis we tell and put on the American people 
about this structural deficit and be honest with them--I think 
this idea that if you raise taxes a penny on somebody that 
makes adjusted gross income of $10 million is somehow a crime 
has to be addressed, because we cannot get along without at 
least some acknowledgement that revenue and expenditure have to 
somehow equal about the same as a percentage of gross domestic 
product.
    I made a little speech here. I know that you know that. I 
hope you will just say it over and over so people understand 
it.
    Secretary GEITHNER. I would be happy to say it. Our fiscal 
position is unsustainable. We will be poor as a country if we 
don't fix that problem. Our priority now has to be growth in 
jobs. That is the fiscally necessary, responsible thing to do. 
Without that you can't fix our long-term deficits. But even 
when we are growing again, the economy is back on its feet and 
back to work, we are still going to be left with an 
unsustainable fiscal position, and that is why--and if we don't 
commit to bring that down, then we face the risk of a weaker 
growth in the future, and that would be unfair not just to 
businesses, but to the families, too.
    So I completely agree with you. And again, I think if you 
listen carefully now, even though it is a deeply political 
moment, if you listen carefully now, it is very encouraging. 
People don't say anymore, deficits don't matter; they don't say 
anymore, tax cuts are free; they don't say anymore, we can 
afford to make huge, expensive commitments in perpetuity 
without paying for them. And that is a healthy recognition, 
very costly recognition. But you hear more people saying that, 
and I think that is fundamentally encouraging.
    We get this economy growing again, we get the unemployment 
rate down, get job creation up again, then we can start to 
shift to bring them down. And what the President's budget does 
is to say that next year we start that process. And, you know, 
that next year is not too late, it is not too soon to start, 
but we start to make it clear that we recognize this, and we 
understand that we got to bring those long-term deficits down.
    Chairman RANGEL. Mr. Doggett from Texas.
    Mr. DOGGETT. Thank you, Mr. Chairman.
    Mr. Secretary, I have two questions that I will state and 
ask separately regarding your testimony this morning that your 
goal is to get the best bang for the buck to get people back to 
work; certainly something all of us share. The first one 
concerns the comments you make this morning that really repeat 
what the President said in his recent radio address, that we 
need to close unwarranted tax loopholes that reward 
corporations for sheltering their income or shipping American 
jobs ashore--offshore.
    As I read your budget proposals, they are exactly the same 
as the ones you advanced last year minus 40 percent of the 
revenue for multinationals who export jobs overseas and shelter 
their income. Since you announced that proposal last year, 
other than a speech by the President in May and occasional 
reference to it, I haven't seen anything done to achieve these 
objectives other than the Wall Street Journal report that you 
and former Secretary Summers assured multinationals that they 
shouldn't be so worried about.
    My question is what reason is there to believe that the 
Administration will do any more this year on the 60 percent of 
the proposal that is left to close unwarranted tax loopholes 
that result in jobs being shipped overseas than it did last 
year?
    My second question, Mr. Secretary, concerns the jobs tax 
credit. Everybody is for a tax provision that will actually 
produce in a cost-effective way more jobs. There is a great 
question about the particular proposal for $33 billion that the 
Administration has advanced. Marty Sullivan, a former Treasury 
Department economist, I think put it most succinctly in saying, 
the general consensus among tax experts is that the credit is a 
stinker, because it simply encourages people to do what they 
would have done anyway.
    Since your proposal is retroactive, surely there can be no 
claim that a new job added in January or February or before 
this bill was signed was caused by this provision. It also 
distorts the market. For my small business in central Texas 
that has been hanging onto its employee even though it has been 
very painful to do so, they get nothing out of this jobs tax 
credit. But for those dismissed employees or a new company 
coming into town, they certainly benefit. Your own staff, one 
of your secretaries, has said, ``Well, we don't know how 
effective it will be, but it may be even if we get 10 percent 
out of this, that will be great, because it will assure 
liquidity for small businesses.''
    Surely the Treasury can come up with a better way to 
promote job growth than a proposal that may be 90 percent 
ineffective, that for $33 billion gives us $3 billion of new 
jobs. The Congressional Budget Office has also noted that this 
provision will be the least help where there is greatest need. 
Could you respond on each?
    Secretary GEITHNER. Absolutely. I have never met a----
    Chairman RANGEL. We have a time constraint which we all 
have. I would suggest that you respond in writing to the 
eloquent questions of Mr. Doggett.
    [The information follows:]
    Chairman RANGEL. And I would like to recognize Mr. Brady of 
Texas.
    Mr. BRADY. Thank you, Mr. Chairman.
    I am confused. You repeatedly regret the $1 trillion annual 
deficit that you were handed as an Administration. And since 
Congress controls the pocketbooks, White House can't spend a 
dime it isn't given by Congress, remind us who was in charge of 
Congress for 2 years when you were handed that huge annual 
deficit?
    Secretary GEITHNER. I think you know the answer to that, 
Congressman.
    Mr. BRADY. It is Democrats.
    Secretary GEITHNER. But the damage to our fiscal future, 
the transformation from $5.6 trillion----
    Mr. BRADY. Got it. We heard that earlier in the comments. I 
appreciate it, Mr. Secretary. I just want to make sure our 
listeners weren't confused by who handed you that horrible 
deficit.
    And I wasn't going to bring up AIG, but since you did, 
there is common ground and anger and outrage at the way AIG's 
bailout has been handled by you and Treasury; Congress, 
Democrats, Republicans; the public as well, both the first two 
bailouts, the SECA deal that gave 100 percent on the dollar to 
the counterparties of AIG, the Fed then trying to prevent the 
public and Federal regulators from knowing the details of that. 
Last year the President was outraged at the $45 million in 
bonuses. It is a year later. It is $100 million in bonuses 
now--oops.
    The Administration's handling of AIG resembles the Keystone 
Kops. It would be funny if it wasn't leaving taxpayers crying 
about it.
    I do think in this economy the White House has taken its 
eye off the ball, pursuing, I think, an extreme agenda and 
failed economic policies. Today consumers have no confidence, 
little confidence in the economy. Businesses aren't willing to 
hire back new workers who make those expansion plans because 
they are frightened by the cost of higher health care costs, 
higher energy costs, higher taxes.
    But where there is common ground is in the President's 
commitment the other night at the State of the Union to double 
exports over the next 5 years. Other economies are growing 
faster than the United States. That is where the customers are 
at. Selling U.S. products and goods around the world creates 
jobs in the United States.
    Up here, Mr. Secretary, I put up a graph of what our 
exports are doing. It took 11 years to double the exports 
during some pretty strong economic times in global growth. And 
my question is, because I welcome what the President said, and 
there is common ground for that, I believe, on this panel and 
in this Congress, so what is the President's plan to double 
exports over the next 5 years?
    Chairman RANGEL. I am going to ask the Secretary to 
respond; however, I hope that Members give time for the 
Secretary to respond within the 3 minutes, because it is so 
unfair to the newer Members who won't get a chance to ask 
questions also. Please be brief, Mr. Secretary, so we can make 
certain that we can get answers.
    Secretary GEITHNER. Congressman, glad to hear what you said 
about exports. I think it is a very realistic objective, partly 
because the world is growing fast, faster, and because American 
companies are very good at competing in a range of things that 
the world needs. So I think it is a very realistic objective.
    I think it requires that we work together to pass strong 
trade agreements. It will expand opportunities in those foreign 
markets. We can't let other countries go and compete away those 
markets from us. It requires some support through Ex-Im Bank 
and Commerce to make sure that businesses are getting a little 
assistance where they can. And it requires we be investing in 
things that help us stay at the frontier of innovation. And so 
by putting the largest investments in basic research and 
development, permanent extension of the R&D tax credit, 
targeted tax incentives to new technologies, those are things 
that make a big difference and help make sure that we are in 
the game gaining market share around the world.
    But I think you are right to emphasize it. In fact, U.S. 
exports have been doing really quite well recently, but we want 
to make sure that we are reinforcing that.
    Mr. BRADY. Are the three pending trade agreements part of 
that plan this year?
    Secretary GEITHNER. Absolutely. As the President said, it 
is not just that. We need to be in the game in Asia as they 
move to try to negotiate new agreements there, and we want to 
make sure that the broader Doha Round of trade agreements, the 
multilateral agreements themselves, we put those in place in a 
way that is going to be good for American companies.
    Mr. BRADY. Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Pomeroy of North Dakota.
    Mr. POMEROY. Thank you, Mr. Chairman.
    Mr. Secretary, I would just note, comments from my friends 
on the other side of the aisle about AIG and the other 
regulatory failures of the last Administration seem to me 
incredibly out of place. We watched under the preceding 
Administration regulatory resolve ultimately fade away, 
yielding to blind faith in market activity.
    I used to be an insurance commissioner. I believe in the 
insurance marketplace. But that doesn't mean you don't watch 
the swindlers, the crooks, and the shortcutters that are going 
to try to rip off, ultimately, the public. That is what 
happened. We are still picking up the pieces, at great expense 
to the public, for that misguided, unbridled faith in the 
marketplace that occurred in the last Administration.
    But the question I want to ask you about relates to job 
growth in this tight budget timeframe. I believe one area where 
we can have job growth, still consistent with very sound budget 
principles, is in the area of pension funding relief.
    This Committee regrettably played a part in putting into 
law an extraordinarily stringent funding regimen for pensions. 
I believe it made no sense because it didn't match assets with 
liability timelines. That was before the collapse. Once the 
collapse occurred, we have crushed portfolio values because of 
market correction. We have low interest rates, which further 
produce a very onerous funding picture.
    They need, I believe, interim funding relief, not to the 
jeopardy of the solvency of the plan, but basically bringing 
funding requirements more in line with solvency principles. If 
we do that, Mr. Secretary, we can also have for companies 
maintaining defined benefit pension plans more cash in the 
operation to grow the operation, to hire employees, to grow the 
economy. I would like your comments on that.
    Secretary GEITHNER. Congressman, I think you are right. We 
think there is a good case for targeted pension relief for just 
the reasons you said, and we would like to work with you on 
doing that. I am not sure we have exactly the exact, precise 
way to do it, but the basic principle is right, and we are 
prepared to work with you on that.
    Mr. POMEROY. Thank you, Mr. Secretary.
    I yield back.
    Chairman RANGEL. Mr. Thompson of California.
    Mr. THOMPSON. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here. And I want to 
thank you personally for the responsiveness of you and your 
office in working on issues through my office.
    Two Members before me have talked about this new jobs 
credit, and I want to associate myself with their concerns. Mr. 
McDermott talked specifically about projects that actually 
generate jobs and, at the same time, generate security to 
communities.
    And I just think it is incongruent that we want to spend 
money to hopefully create jobs in small businesses. I don't 
know anybody in business who hires an employee because they are 
going to get a tax break. People hire employees because they 
have work to do.
    And, at the same time, this budget cuts the Corps of 
Engineers. There are projects all across this country that are 
critical to the public safety of the people that we represent, 
projects that are beyond shovel-ready, they are already going, 
and they are terribly underfunded. It seems to me that we could 
get a lot more bang for taxpayer dollars if we looked at that 
rather than trying to put some seven-bank shot together on how 
we hire employees.
    Secretary GEITHNER. Congressman, I just want to say I 
completely agree. The most important thing we can do is to make 
sure there is growing demand for the products American 
businesses are creating. That is a necessary thing. Nothing is 
possible without that.
    But I just ask you, please take a careful look at the way 
this was proposed. There is a lot of concerns about previous 
versions of this. We have listened very carefully to those 
concerns. I am not sure we have addressed all those concerns, 
but this is designed with a view to exactly those concerns. And 
we think it is better than the previous, but we do not have a 
monopoly of ideas on this.
    Again, our test, as you said, is we want to do things that 
have the highest prospect for a dollar of taxpayer resources 
providing a spark to investment, a spark to job creation. And 
we think these can play a role alongside what you said, which 
is support for infrastructure, State and local governments, 
those kinds of measures.
    Mr. THOMPSON. Thank you.
    Another proposal in the budget is the idea that we would do 
away with the LIFO, the last-in, first-out accounting practice. 
This is an accounting practice that works well for some U.S. 
businesses. If we do this, if we end it, what is going to 
happen is U.S. small businesses are going to take a big tax 
hit, and their competitors overseas are going to have a 
terrific advantage over us in the marketplace.
    There are some industries that have to hold their inventory 
for a long time. This is a fair and reasonable way to recognize 
that, and I would strongly urge you to go back and revisit 
that, along with the user fee that this budget imposes for TTB.
    I can't think of anything that would be more difficult for 
these small businesses to deal with than this. It even charges 
people who don't use TTB. And, again, it gives a terrific 
advantage to our overseas competitors in the markets. So I 
would urge you strongly to revisit these two issues.
    I yield back.
    Chairman RANGEL. I might suggest, Mr. Secretary, the 
Majority and Minority get together in a workshop atmosphere 
with your office to thrash these ideas out, where we have more 
than 5 minutes back and forth.
    Mr. Ryan, it seems like you have been with me all weekend 
on TV. But you are recognized.
    Mr. RYAN. Not in person. We should get together more often.
    Chairman RANGEL. I would like to yield to you.
    Mr. RYAN. All right. Thank you, Chairman. I appreciate it.
    First, just an order of business, I sent you a letter last 
year, 
Mr. Geithner, about Delphi pensioners, salary pensioners. I 
want to insert this for the record. If you could get back to 
me, I really want to get a response from you.
    Chairman RANGEL. Without objection.
    [The information follows:]
    Mr. RYAN. I brought up page 146 in your budget, which is 
your S-1 budget totals. And, when you take a look at this, I 
just find this amazing. You have your budget totals here, 
which, by your own admission, from your own budget director, 
you are a smart guy, you have smart economists over there, all 
of them say that, for the medium and long run, the budget 
deficit has to get below 3 percent of GDP. Yet, this budget 
plan you are bringing to us doesn't even get close to it.
    Secretary GEITHNER. You are exactly right. And we said 
clearly----
    Mr. RYAN. Since I have 3 minutes----
    Secretary GEITHNER. Okay, sorry.
    Mr. RYAN. So you have this warning on here. It is like the 
warning on a cigarette pack. You have this little magic box 
underneath your budget totals that says we are going to have a 
commission do it. We are going to have this partisan 
commission, two-to-one ratio of Democrats over Republicans, 
that will give us a report after the election----
    Secretary GEITHNER. Well, no, it is not a two-to-one ratio. 
That is not fair. It is not a two-to-one ratio.
    And let me say it slightly different. What we are saying is 
we are going to solve our part of the mess we inherited. So we 
inherited a structural deficit, and to bring that down, we are 
going to have to work together.
    Mr. RYAN. Then why don't you do it in your budget? If you 
are going to solve this problem--you guys run the government. 
If you are going to solve our fiscal situation, why don't you 
do that? Why don't you give us a budget that actually gets the 
deficits to a sustainable level?
    Secretary GEITHNER. All right, then let me--just one more 
thing.
    Mr. RYAN. No, no. Let me read a quote. I want to read a 
quote. I have 3 minutes. Let me read a quote from Mr. Orszag in 
the Wall Street Journal, which I completely agree with. ``The 
unusual situation that the government finds itself in, with 
other countries willing to finance the U.S. debt at low rates, 
won't last.'' And he added, ``When it flips, the question is, 
how do you get ahead of that to avoid the downward spiral of 
rising interest rates, a plunging dollar, and a sinking 
economy?''
    I couldn't have said it better myself.
    Secretary GEITHNER. I think it is a good quote, too. I 
agree with that.
    Mr. RYAN. The vigilantes in the bond markets are going to 
get us, and the American people are going to get hurt.
    So why aren't you giving us a budget, not punting to a 
commission, but why aren't you giving us a budget that, using 
your own definitions and standards, actually is sustainable?
    Secretary GEITHNER. Congressman, we are proposing a budget, 
again, that takes the huge mess we inherited----
    Mr. RYAN. You can blame Bush only so long.
    Secretary GEITHNER. Congressman, it is just a factual 
thing. Again, I would say, when I left the Treasury in 2000, it 
was surpluses on OMB and CBO's round as far as the eye can see. 
When we came in, it was a deep trench.
    Mr. RYAN. Fine. You obviously inherited a tough situation. 
You are making it worse, by your own admission.
    Secretary GEITHNER. Again, we are willing to join with you 
in digging our way out of this mess. We are proposing to bring 
that deficit down from its ridiculous levels today where we 
inherited them, more than half of the share of the economy, we 
get it below 4 percent. But we would like a little assistance 
in taking it the next way forward.
    But you are absolutely right about the basic imperative, 
which is, unless we get these down, we are going to be weaker 
as a country in the future. And it is very good for the country 
to hear you and your colleagues stand here today and say, ``We 
are ready to be fiscally responsible.'' That is a good thing 
for the country. We welcome it. We want to work with you on how 
we are going to do that.
    Mr. RYAN. You shouldn't worry about the criticism of us as 
much as you should about the bond markets.
    Chairman RANGEL. Mr. Larson of Connecticut.
    So much for the bipartisanship.
    Mr. LARSON. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for your service to the 
country.
    Mr. Secretary, I wanted to ask you specifically, and I know 
you may have said something in your opening remarks as well, 
but with regard to the privatization of Social Security or with 
the idea of a path forward being one that includes the 
privatization of Social Security or vouchers for Medicare, what 
is the Administration's position on that?
    Secretary GEITHNER. Congressman, let me say clearly, the 
President, I am confident, would oppose it. I would oppose it. 
I don't think it is fair to say to Americans that we are going 
to privatize Social Security, leave elderly Americans with a 
voucher that wouldn't cover the costs of basic health care as 
they go into retirement. I do not think that would be fair, and 
we would work against that, just as they have stated directly.
    Mr. LARSON. Is this anything different than what we heard 
from the previous Bush Administration about how they would 
privatize Social Security?
    Secretary GEITHNER. Well, Congressman, I don't actually 
understand and have not seen the details of that proposal, but 
I actually don't think that that proposal would have a lot of 
support on the other side of the aisle too. But that is for 
them to speak to.
    Mr. LARSON. Well, I want to thank the Secretary and 
certainly would support the Administration in that respect.
    With regard to small businesses, if you could further 
enlighten us with regard to why the Administration is focused 
in this area and what you predict the outcomes will be for 
small businesses, which are hurting?
    Secretary GEITHNER. Businesses create jobs. We need 
businesses, small and large, to start to invest and add back 
the jobs they cut as they were scared the economy was falling 
off the cliff. That requires growth. And the economy is now 
growing, but we want to make sure we are reinforcing that.
    Growth is not enough. With growth, we want to see more jobs 
created. For that to happen, we think there is a good case for 
some targeted incentives to help reinforce that process, and 
they need some credit if they are going to be able to expand. 
And lots of small businesses across the country, through no 
fault of their own, if they were unlucky in their bank, or 
there are parts of the country that are experiencing the worst 
of this stuff, they are hurt because the credit pipes in the 
economy are still clogged. So we need to open those up if they 
are going to be able to start to meet what is growing demand, a 
slight uptick in demand for their products. That is the basic 
case.
    So alongside what we have to do on infrastructure, help for 
State and local governments, those kinds of proposals, we think 
there is a good case for targeted tax incentives and measures 
to help get that credit where it can be best used, by small 
businesses.
    Mr. LARSON. Well, I hope that you and the President, as the 
President continues to go out on the road, et cetera, we are 
able to talk about small business, but especially about the 
preservation of Social Security and Medicare and how important 
that is to such an important base of society and so many baby 
boomers who are now in the position to seek these benefits. It 
is true that we have to make sure it is sound and secure into 
the future, but that doesn't mean throwing the baby out with 
the bath water, so to speak.
    Secretary GEITHNER. I couldn't agree more. Again, it is 
important to understand that this----
    Chairman RANGEL. The time has expired.
    Mr. Becerra.
    Mr. BECERRA. Thank you, Mr. Chairman.
    Mr. Secretary, it is good to see you here. Thank you for 
being with us.
    Before I begin, I just want to mention a conversation that 
I had with Assistant Secretary Allison recently, about a month 
or so ago, about the programs that you have underway under TARP 
to try to help get dollars out into our local communities, to 
our local banks and so forth, and the efforts that are being 
made to make sure that businesses owned by veterans, women and 
minorities have an opportunity to participate. These are very 
small businesses, and we want to make sure that they are able 
to help us manage those accounts.
    I am hoping that you will allow me to follow up with you, 
because you indicated an interest before. And I learned some, 
not disturbing information, but some confusing information 
about how you track that progress. So I would like to follow up 
with you, if I may, on that.
    Secretary GEITHNER. I am happy to do that. It is very 
important to me. Our overall number on contracts is quite 
strong. But if you look at value of contracts, it is too low, 
and we would like to do better.
    Mr. BECERRA. I would like to follow up with you on that.
    I would like to turn to some charts that were prepared by 
the Budget Committee that I would like to begin with.
    There is a chart that should go right before that. There we 
go.
    Mr. Secretary, if you take a look at this chart, what you 
will see is this is a chart that tracks our annual deficits 
since 1981. It goes back a ways because too often the 
conversation here is very limited in scope. We talk only about 
this year's deficits or this year's problem or this year's 
accumulated debt without taking into account the history of 
where we have been. So I decided I had better go back a number 
of years, some 30 years, to talk about what has gone on in this 
country in terms of deficits and surpluses.
    If you take a look, what you see is something very 
interesting. That chart ends in 2009 when President Obama was 
handed the keys by President Bush, and you can see the steep 
decline that we were in. That is what we were facing as a 
country in terms of our annual deficits. And you can also see, 
the only time we were really in surplus was under President 
Clinton.
    Now, if we go to the second chart, what that first chart 
really amounts to is a chart that shows how many years of 
deficits we had. And, quite honestly, when you total it up, it 
turns out to be a lot of debt. Annual deficits lead to lots of 
debt, and we ended up having a doubling, a near doubling of the 
size of the national debt under the previous Administration.
    Well, if we will go to the next chart, it is tough to turn 
that deep a hole into a pile of good news. And while it hasn't 
been the best of news for Americans totally this year, this 
past year, things have gotten much better. As you know, we have 
actually seen economic growth for the first time consistently 
for some time. It has been about 2 years since we saw 
consistent economic growth, and now we are beginning to 
experience that.
    And, if we go to the next chart, we will see how that now 
uptick toward economic growth--and I believe some of that is 
due to the policies of the Administration--we now begin to see 
jobs not necessarily being lost in the numbers they were--a 
year ago, they were lost to the tune of 741,000; that is 24,000 
jobs lost a day when President Obama got the keys from 
President Bush--to the point where now we actually saw a little 
bit of job growth--you can't really see it much in November--
and certainly a vast reduction in the jobs that are being lost. 
And some believe we are going to see job growth in the next 
quarter.
    Finally, the last chart I wanted to point out is that it 
does matter if we have deficits and run massive debts because 
the American public may not think in terms of the national debt 
but they certainly know what they have in their bank account. 
And we saw the 401(k)s and bank accounts of Americans drop 
dramatically. Now we are seeing them come back.
    So, while the news isn't all good, it is improving, and you 
have to put it in an historical context of where we were.
    So, I will end with this question, Mr. Chairman: Mr. 
Secretary, I don't know if you know this, but let me ask you a 
question. You have a train with about 120 cars on it traveling 
at 50 miles an hour. And it is traveling recklessly, fiscally 
recklessly. How long does it take to stop that train when the 
conductor says, ``I have to pull the emergency brakes and 
change course?'' How long does it take?
    Chairman RANGEL. Mr. Linder of Georgia.
    Mr. BECERRA. Mr. Chairman, if I could ask the Secretary if 
he knows the answer?
    Secretary GEITHNER. It is going to take a while. You can't 
turn on a dime, but you have to start.
    Mr. BECERRA. I will give you the answer. It takes about a 
mile and a half to stop that train. It is going to take a while 
to turn this country around.
    Mr. LINDER. Mr. Secretary, welcome. I am glad you are here.
    In your opening comments, you stated that it was the 
obligation of your Department to come up with these proposals, 
such as the new tax on banks to fill the holes. When did this 
proposal originate? Who originated it? How long has it been 
under discussion?
    Secretary GEITHNER. Congressman, we at the Treasury started 
to take a look at how to meet that obligation in the law in the 
fall of this year.
    Mr. LINDER. Would you share Larry Summers' and Christine 
Romer's comments on this proposal?
    Secretary GEITHNER. Well, again, this is the President's 
proposal, and we recommended it to him, and it had really broad 
support.
    Mr. LINDER. Would you share with us some of the inner-
office memos on this going back to last fall?
    Secretary GEITHNER. Congressman, again, I would be happy to 
explain why this versus the alternative.
    Mr. LINDER. Would you share with us some of your inner-
office memos on the origination of this idea?
    Secretary GEITHNER. I would be happy, as always, to make 
sure we are helping this Committee make good choices about how 
best to do this. But, again, the basic point, and it is a 
simple point, is I think the law required us to make sure we 
proposed how to recoup losses. We looked at a bunch of 
different ways to do that. We wanted to do it in a way that was 
going to be fair, it was put on the people who benefited the 
most, and didn't leave the taxpayers exposed to a dime. And, if 
we could, we wanted to do it in a way that was like a fee on 
leverage and on risk. That is why we chose this model. We know 
there are other ways to do it, but we think this is a pretty 
commonsense proposal.
    Mr. LINDER. Will you share with us some of the background 
memos on this, back and forth?
    Secretary GEITHNER. Again, I would be happy to talk with 
you about all the discussions we had about alternatives so that 
you can understand a little bit about why we came to this 
choice.
    Mr. LINDER. Would you give us some of the memos between you 
and other people in the Department when this decision was 
arrived at?
    Secretary GEITHNER. Well, Congressman, do you want to have 
a debate about the merits of the proposal?
    Mr. LINDER. No, I just want to know when it started.
    Secretary GEITHNER. I told you when it started. Again----
    Mr. LINDER. Then I would like to see the memos.
    Secretary GEITHNER. I would be happy to be responsive to 
any request you make about any of the merits of this versus the 
alternatives, how we came to this judgment. I will be happy to 
do it.
    Mr. LINDER. Thank you.
    On the TARP wind-down, you mentioned something about that 
in your opening comments. Are you going to abide by the statute 
that says that money should go to pay down the deficit, or are 
you going to reuse the money?
    Secretary GEITHNER. Of course we are going to abide by the 
statute. The way the statute is written is that when repayments 
come in, they go to reduce the debt. And it is important to 
recognize we have been successful in getting, I think, about 
$170 billion back from the banking system, and that goes 
directly to reduce our long-term fiscal challenges. But what it 
didn't do is reduce the authority Congress gave us. And the way 
the law was designed is we are still left with that authority.
    Now, we are not going to have to use that authority, but we 
think it is a good idea to preserve some of that authority, 
that existing authority--and we are not going to use anything 
like that $730 billion--to make sure we are helping small 
community banks do what they need to do to help their business 
customers grow and expand. So that is the basic principle, that 
is the basic design of the bill.
    Again, I hope this is something that we can do together, 
because community banks across the country--it is in every 
district, in every State--they will say what is true, which is 
it is hard for them to raise capital, even though they were 
very good, well-run banks. And some of them have opportunities 
to expand. And there is a very good economic case for trying to 
make sure you can take a dollar of investment in them and 
encourage lending. It has some of the highest return on a 
dollar of tax revenue that we have seen.
    Mr. LINDER. So your answer is, you are going to reuse the 
money?
    Secretary GEITHNER. No, no. No. I say, the way the law is 
written, the $175 billion we took back from the banking system, 
that was in the banks when I came into office, goes to reduce 
the debt. But we are going to take some of the authority that 
Congress authorized, a very small amount of that authority, but 
it is a good amount of authority, and make sure that we are 
helping the small banks, too.
    Chairman RANGEL. Mr. Linder, if you could identify these 
documents that you are seeking, I will try to help you to get 
them.
    Mr. Blumenauer of Oregon.
    Mr. BLUMENAUER. Thank you, Mr. Chairman.
    And thank you, Mr. Geithner, for joining us. You will be 
surprised to know that all of us Members of Congress think it 
is a good idea to be fiscally responsible. The issue comes in 
when we do it, how we do it.
    To this extent, I commend my friend Paul Ryan, who is 
leading the charge for the Republicans on the budget, for 
coming up with some specifics. I will debate Paul on a few of 
those. But I think he is offering a valuable service, when 
other people dance around it, to say, ``Here is what we need to 
do.'' And I think this is something that we need to continue 
doing.
    You have some elements of the budget which I like. You have 
taken on some of what I think are unjustified subsidies to 
agribusiness that actually don't help small farmers and 
ranchers. It might help the Treasury.
    In the past, you have offered up in the budget 
reinstitution of the Superfund tax, which would actually help 
us clean up the toxic legacy for decades, create jobs, and 
protect the environment.
    What you said a moment ago about the fiscal situation not 
being sustainable and that our priority should be on jobs and 
recovery of the economy, I couldn't agree more.
    But I would hope that, as you develop this and you work 
with Congress, you can think about one area that is not 
sustainable, and that is our infrastructure spending. You are 
hearing a common theme, at least on this side of the aisle. We 
have a Highway Trust Fund in deficit for the first time in 
history. We are shoring it up with the general fund, which is 
adding to the deficit in the long run. We are at an impasse 
with reauthorization. So we are not dealing with the big-
ticket, long-term investments in transportation that would 
create jobs and revitalize the community.
    I am hopeful that we can have a thoughtful discussion about 
the wisdom of spending about as much money on more tax breaks, 
extending some provisions more for business, which would be 
about this fiscal headroom that would be necessary to actually 
fully fund a transportation bill that would put people to work, 
that all the economists we have talked to say would have a 
higher economic multiplier, and would let us be on with the big 
task ahead of us.
    Do you have any comment about actually financing the 
infrastructure deficit?
    Secretary GEITHNER. Again, our basic test should be what is 
going to do the best job of getting growth back, growth 
stronger, more jobs, spark for investment, do that in a way 
that is fiscally responsible over the longer term and do it in 
a way that is fair--fair on small businesses, fair on working 
families. That is the basic balance we have to strike.
    And I agree with you that, if you do infrastructure 
spending right, you get a very high return, and you do things 
that are good for how fast we can grow in the future, how fast 
businesses can grow, because people depend on a basic level of 
infrastructure that we don't really have as a country. But we 
have to find a balance between those things. I want to work 
with you and we will be happy to work with you on what the best 
balance is.
    Mr. BLUMENAUER. Thank you.
    Chairman RANGEL. Mr. Kind of Wisconsin.
    Mr. KIND. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for your testimony here today.
    In speaking about fairness, you know, to be fair, I mean, 
there is a whole lot of hand-wringing going on around this 
place right now in regards to the cause of the budget deficits 
from a lot of people who actually should know better. I mean, 
recent history shows that, while the Republicans were in 
control with a Republican President, they passed two large tax 
breaks that primarily benefited the most wealthy, not a nickel 
of it offset or paid for in the budget.
    This came on the heels of two wars overseas, not a nickel 
of it paid for, and then the largest expansion of entitlement 
spending since Medicare first passed in 1965 when they passed 
their prescription drug plan, which analysts say is going to 
cost our country about $1.2 trillion over the next 10 years, 
not a nickel of it paid for.
    So this Administration walked into a budget mess and an 
economic situation perhaps worse than any previous 
Administration since FDR when he walked into the Great 
Depression. So it took a while to get into it, a lot of bad 
policy decisions, from my point of view, and it is going to 
take a while to get out.
    And I am glad you and the President and the Administration 
are so focused on a robust small business agenda, because we 
understand the crucial role they are going to play as a 
locomotive to pull us out of this economic recession with job 
creation.
    In my district in western Wisconsin, the small businesses, 
the family farmers are the backbone of the economy. And 
everything we can do to help them right now keep their doors 
open and expand jobs is going to be needed. That is why the 
Administration's proposal of extending the accelerated 
depreciation, the immediate expensing, no cap gains tax for 
small businesses, this new $30 billion loan program that you 
want to set up--and I want to work with your office to make 
sure that family farmers are also eligible for those loans, 
because they are going to need that credit this spring in order 
to get the spring plant in, too. That is going to be an 
important component.
    But I want to focus briefly on the new jobs tax credit. I 
guess this fits into the category of ``we don't do anything new 
around here except the history we repeat.'' And this is not a 
new idea. It was something tried back in 1976. Maybe I am 
missing something, but from the analysis and data that came 
from that tax credit attempt back then, it fell kind of flat 
and we didn't get a good bang for the buck from that 1976 new 
jobs proposal.
    What do you see in your proposal which is different from 
1976 that might give us hope that this might spur some job 
creation, especially with the small businesses in the country 
that will add jobs and help get this economy back on track?
    Secretary GEITHNER. There are two parts to this proposal.
    One is if you add a net job relative to the amount of 
people you had on the payroll in 2009, you get a $5,000 tax 
credit. In addition, if you add to payroll, if you increase the 
hours of the people you have currently employed, if you raise 
wages and salaries for them, then we give you payroll tax 
relief alongside that.
    It is very different in design from the one you referred to 
from the late 1970s. Although, the record on that is somewhat 
better than I think you said. It is very different from what 
the Congress considered last December in designing the Recovery 
Act. And there may be different ways to do this, but we think 
it is designed in a way that is much more effective in 
providing a bit more spark to hiring as growth demand picks up.
    But you are right, this is a controversial proposal, and we 
are trying to be creative about it and pragmatic about it. And, 
of course, we recognize what many of you have referred to, 
which is what businesses say most is they want to make sure 
they are facing growing orders, have the financing available to 
meet those orders. But I think this will provide a little bit 
more of a boost, a little more spark to make sure, as we grow, 
we are creating more jobs than we otherwise would.
    Mr. KIND. Thank you.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Tiberi.
    Mr. TIBERI. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here today.
    Yesterday the President said in New Hampshire, ``We must 
budget our money the way the American people do.'' I am sure 
you agree with that.
    My dad came to America literally on a boat and got a job in 
a manufacturing plant. Some years he made less than others. 
When he made less, we spent less. When he lost his job, when he 
lost his pension, when we lost our health care, we spent even 
less than the year before.
    You recognize this document?
    Secretary GEITHNER. I do.
    Mr. TIBERI. I thought you would. Back in 2007, the American 
people gave us $2.5 trillion to spend, their money. We spent 
$2.7 trillion--too much. The deficit that year was $160 
billion. By the way, after several years of two wars and a 
Medicare prescription drug benefit, our deficit was too much, 
but it was $160 billion.
    Two years later, the economy went off a cliff. The 2009 
budget, according to your numbers, the American taxpayers sent 
us $2.1 trillion, of course, less than 2 years earlier. We 
spent $3.5 trillion.
    To go further, on your budget, if you look on out in the 
out-years, the 2015 estimate, because of tax increases we are 
going to take from the American people $3.6 trillion. My dad 
would say, ``Wow, okay, we spent $3.5. Now we are going to take 
in $3.6?''
    Long term, to Mr. Becerra's point, we fixed it, right? No. 
My dad would be highly disappointed, because we are going to 
spend $4.3 trillion. And to make matters worse, to go 5 years 
more, we are going to spend $5.7 trillion. That is not how the 
American people budget, Mr. Secretary.
    My question: Small business, everybody talks about small 
business----
    Secretary GEITHNER. Congressman, could I just respond 
quickly on that point?
    Mr. TIBERI. You can after I ask my question, because the 
Chairman will cut me off. So you can answer two questions, that 
question and then you can answer this question.
    We talk about small businesses. Both sides talk about small 
businesses. In this proposed budget, we give you and the IRS 
the authority to now reclassify independent contractors, 
independent contractors who work across the country for small 
mom-and-pop businesses--I am thinking of a homebuilder friend 
of mine who uses carpenters, he uses people to lay carpet, he 
uses people to put on the roof as independent contractors. And 
now you could reclassify them for the issue of payroll taxes, 
health care benefits, pension costs. This will put small 
businesses across America out of business.
    Secretary GEITHNER. And we are not going to do that, and we 
are not proposing to do that. But I am glad you raised that 
point.
    Mr. TIBERI. Will you take that out?
    Secretary GEITHNER. I would like to say this exactly this 
way. We are proposing that we work together to legislate 
authority for the IRS to clarify a system today that is very, 
very hard for small businesses to comply with.
    Let me just give you an example. A small business today 
looks at the current system. They have to try to figure out 
what happens in the tax courts over time, case by case. They 
have to take into consideration more than 20 different factors 
to try to figure out and make that judgment like that. It is 
not easy for them. It is not fair for them versus large 
businesses.
    So what we are suggesting is a very simple, pragmatic 
proposition, but we have to work with you to do it. We can't do 
it on our own; is that we make it a little easier. We are not 
going to change that basic line though. And I completely 
recognize and agree with the concerns you said, and I will not 
support things that would carry that risk.
    But I want to come back to where you began. Your rendition 
of history is right in the sense that it is a mess created to 
behold, but it is much worse than you said. It is not just that 
we came into office with a $1.3 trillion deficit, but the 
projected deficits at that point were going to add an 
additional $8 trillion over the next 10 years.
    Now, you are right about governments and households, and 
you are right to say that governments have to make choices. We 
have to live within our means, too. But in a financial crisis, 
in a recession, you can't save your way out of it, you can't 
cut spending and expect that to lift your way out of it.
    When you are facing this kind of deep wreckage and damage, 
the basic obligation of government--we learned this, it was 
expensive in the Great Depression, but we learned our mistake. 
We have watched lots of other countries make that mistake. But 
you cannot cut deficits in the midst of a deep financial crisis 
and expect to do anything but see thousands of jobs lost, 
millions lost, thousands of businesses close, millions more 
Americans lose their homes. There is no----
    Mr. TIBERI. My time has expired, Mr. Secretary. I was just 
quoting the President.
    Chairman RANGEL. Mr. Pascrell.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary.
    Despite the promises made in TARP, it seems as hard as it 
was a year ago for small businesses in my area of North Jersey 
to get loans. You know that better than I do. So now you are 
talking about $30 billion from TARP to create a new separate 
program designed to provide capital to small and community 
banks, as I understand it. I agree that we should invest TARP, 
and I think we should not look lightly at the suggestion we 
reduce the deficit by TARP.
    What is the justification and evidence that this is going 
to open up lending? We had justification last year. It didn't 
work. What makes this justification any more cogent?
    Secretary GEITHNER. Let me try and say it this way. We have 
a recession caused in part by the fact that people across the 
country borrowed too much. We are facing--again, we had an 
economy shrinking at an annual rate of 6 percent after they had 
borrowed too much. So there was no way through this that wasn't 
going to see borrowing come down as businesses and families 
went back to living within their means. And you have seen a 
precipitous drop in demand for loans and credit by very strong, 
healthy businesses.
    But what is a problem for us as a country is when a good 
business, a viable business that has good customers, that can 
expand, wants to grow, and it can't meet that demand with 
access to credit.
    Mr. PASCRELL. And that is a lot of businesses.
    Secretary GEITHNER. And that is a lot of businesses. I 
agree with you completely.
    Now, that is not easy to fix, because the pipes are still a 
little clogged for small business credit. What this does is 
help open up those pipes by trying to make sure that a small 
bank doesn't have to cut further----
    Mr. PASCRELL. So you think that is the difference in 
providing TARP money for the smaller banks as compared to what 
we did last year? Is that what you are saying?
    Secretary GEITHNER. No. The capital that went to small 
banks last year was very, very helpful. And I think if you talk 
to small banks across the country, those who came and took that 
money said they were able to do things they could not do. In a 
simple way, a dollar of capital from the government creates $8 
to $10 in lending capacity. And that was very effective.
    But what you saw happen last year--and this is important to 
recognize--we had more than 650 banks, about 650 small banks, 
withdraw their applications for assistance from the government, 
for lots of reasons, but among those reasons were two: One is 
there was a public perception created that that made them look 
weak. Many competitors ran ads against them, the ones that took 
assistance, saying they were weaker for it. And they were very 
scared that that assistance would come about with burdens and 
conditions, making it harder for them to run their bank.
    Mr. PASCRELL. My time is running out. I just need to say 
this, Mr. Secretary: We need to do something about the 
financing of foreclosures.
    Finally, the AMT, when I read this budget, you talk about a 
permanent solution to AMT, but it looks like you are paying for 
it with deficit financing. We don't want to go back. You go 
back to the past Administrations, but it seems to me you are 
replicating this by not calling for paying for the reduction 
permanently of the alternative minimum tax. You are doing the 
same thing as those other guys did.
    Secretary GEITHNER. No, absolutely not.
    Mr. PASCRELL. Well, how are you paying for it?
    Secretary GEITHNER. We are proposing to reinstate the basic 
disciplines on spending and revenues that were in place in the 
1990s to help constrain exactly the concern you raised.
    Chairman RANGEL. Mr. Crowley.
    Mr. CROWLEY. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. Good to see you again.
    Before I go into my line of questioning with you, I feel 
compelled to highlight something that was brought up earlier 
today by my good friend Kevin Brady from Texas when he inquired 
about AIG. As someone very intimately involved in this issue 
with you, as well as with Mr. Kanjorski from Pennsylvania, I 
think it is important that we not rewrite history here today.
    I think you did a good job in your opening statement. But I 
want to just clarify again that the former President and his 
party begged this Congress to create the TARP. The former 
President and his party gave the money to AIG almost 
unfettered. And the former President and his party did not 
provide for oversight of that money or of the AIG bonuses. And 
now they want to blame this Administration and your office for 
their mistakes and their methods, just like they will do on the 
deficit here today as well.
    Mr. Secretary----
    Secretary GEITHNER. Congressman, you need to start a little 
further back even than that, okay? Because what happened in 
this country is we allowed people to get around basic 
protections we put in place on banks and to build up huge risk 
and leverage outside those banks, doing things like banks do--
this is true in AIG and a range of other institutions--without 
any effective oversight or constraints and without the kind of 
basic tools like bankruptcy that we used to handle these kinds 
of problems for basic banks.
    Those two failures, that failure of regulation and policy 
and the failure of tools to give us bankruptcy, those were 
tragic mistakes. And that is why it is so important that we fix 
this mess and put in place reforms so we are not faced with 
those choices again.
    Mr. CROWLEY. Thank you, Mr. Secretary.
    Mr. Secretary, if we took all of the spending, if we zeroed 
out all spending, no more Coast Guard, no more food safety 
inspectors or air traffic controllers or cancer research at 
NIH, and didn't pay any Federal employees, we would still have 
a trillion-dollar deficit, is that correct?
    Secretary GEITHNER. I think it is exactly right that the 
principal factors driving our deficits are not the things you 
referred to.
    Mr. CROWLEY. The principal factors are the issues of Social 
Security and especially the out-of-control costs in the 
Medicare system, is that correct?
    Secretary GEITHNER. Absolutely. But it is not just that. It 
is the tax cuts that are in place for the most fortunate 
Americans.
    Mr. CROWLEY. I was going to get to that point.
    Secretary GEITHNER. I am sorry.
    Mr. CROWLEY. That is all right. You did it for me.
    Mr. Secretary, I want to applaud Mr. Ryan, as well, for his 
honesty and presentation of an internal budget. But, again, I 
believe, as my colleagues do as well, they are just bringing 
out again some of the failed policies of the former 
Administration rejected by the American people, and that is the 
privatization of Social Security and the providing of vouchers 
under the Medicare system. They were rejected before. I hope 
this Administration rejects them again, as you stated before, 
and the President strongly rejects that proposal.
    Secretary GEITHNER. Yes, we will.
    Chairman RANGEL. The Chair recognizes Ms. Brown-Waite of 
Florida.
    Ms. BROWN-WAITE. I thank the Chairman.
    Thank you, Mr. Geithner, for being here.
    Mr. Chairman, I have a series of five questions. I 
obviously won't have time because our time was truncated. So I 
may submit them and ask Mr. Geithner to respond to four of 
them, and one I will ask.
    Chairman RANGEL. Without objection.
    [The information follows:]
    Ms. BROWN-WAITE. Thank you.
    Americans are very concerned about jobs and certainly the 
escalating national debt. The most recent estimates indicate 
that the United States will be spending about $700 billion a 
year in interest payments by the end of this decade. To put 
that in context, that is kind of like a new TARP every single 
year, for which the taxpayers get zero in return. And, by the 
way, I didn't vote for the TARP.
    Right now, you are financing current interest payments by 
borrowing more. The President's budget freeze is a drop in the 
bucket. What happens when confidence fails and interest on 
Treasury bonds skyrockets?
    The second part of that question is, speaking of TARP, 
community banks are still doing some lending, and yet your 
proposal is to escalate that. But the larger banks, the larger 
banks that we helped out, sir, are doing nothing. They are 
calling in lines of credit. They are putting businesses out of 
business. They are calling in notes. And that is one of the 
reasons why we have such a problem today in this economy.
    Why not deal with the large banks who sucked the money from 
the American public, sir? Could you answer that?
    Secretary GEITHNER. Congresswoman, you are absolutely right 
about the corrosive cost to our economy of having large 
deficits, this huge increase in the debt we inherited, create 
much higher interest burdens. And we have to work together to 
bring down those long-term deficits. I completely agree with 
you, and you said it well, and it is important for people to 
highlight that.
    Now, let me talk about the financial system just very 
quickly. What we did when we came into office is we took back 
$170 billion from the largest banks in the country by forcing 
them to go out and raise private capital so the American people 
could take those resources and put them to meet our long-term 
needs, including the one you pointed out, which is these deep, 
long-term fiscal deficits and their burden.
    Now, it is very important that we keep working together----
    Ms. BROWN-WAITE. Sir, I don't think you can use this money 
twice. I don't think----
    Secretary GEITHNER. Oh, we are not using it twice. As I 
said, the way the law is written----
    Ms. BROWN-WAITE. I don't think you can use it to give them 
back to the community banks and comply with the law that says 
that has to reduce the deficit.
    Secretary GEITHNER. Congresswoman, and you did not vote for 
it and I did not design the law, but the way the law was 
written, it was very carefully written. It says that when we 
get repayment--and let me say this again, $170 billion in 
repayments from our financial system replaced by private 
capital----
    Ms. BROWN-WAITE. Sir, my time is almost up.
    Secretary GEITHNER. I want to make sure we get this right.
    Ms. BROWN-WAITE. One other question. When we talk about the 
fact we had a surplus, nobody is saying, guess who was in 
charge of Congress? Sir, I think you know and I know and the 
American people know, it was the Republicans who insisted on 
that. And so it was the Republicans who controlled Congress at 
the time.
    With that, Mr. Chairman, I yield back the balance of my 
time.
    Chairman RANGEL. Okay. Let's see now. Mr. Van Hollen.
    Mr. VAN HOLLEN. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary.
    It is indisputable that the Obama Administration inherited 
an economy in free-fall and that, before the President even put 
his hand on the Bible, we had a $1.3 trillion deficit last 
year. The question, of course, is how we go forward. And I 
think this discussion is very healthy, because the more we hear 
some ideas from the other side, the more we hear that they want 
to turn back the clock to some of the proposals from the Bush 
Administration that got us into this mess to begin with.
    Let's just talk about tax policy. We talked about that this 
morning. The recovery bill provided tax relief for 95 percent 
of working Americans--95 percent of working Americans. The head 
of the Republican House conference the other day described 
those as ``boutique tax cuts,'' and then turned around and 
asked the President if he would do a tax cut that helped the 
wealthiest. We have heard again this morning the idea that we 
should continue in place the tax cuts that benefited the 
wealthiest Americans, and at the same time we say, ``You guys 
got to get those deficits under control.''
    You can't have it both ways. The Bush tax cuts that the 
President has proposed to allow to expire on their own terms, 
that portion of it benefit, on average, Americans who have 
income of $809,000. This is on incomes over $250,000, with 
average incomes over $800,000. And by doing that, we will 
reduce the deficit by $826 billion over 10 years, almost a 
trillion dollars.
    So, it is interesting to hear the notion that we should 
turn back the clock once again, give disproportionate tax 
breaks to the wealthiest Americans, and then turn around and 
say, ``Well, let's work together to reduce the deficit.'' So 
let us focus on ideas. That was one of them.
    We also adopted statutory PAYGO, which I think most 
Americans understand the notion that you got to make do. You 
have to make sure if you are going to add somewhere to 
government programs, you have to find offsets one way or 
another to pay for them. Again, we look forward to the House 
passing that.
    We have had a discussion about TARP. President Bush came to 
this Congress and said, ``We are facing a meltdown in the 
financial industry. We have to rescue it.'' A distasteful 
choice; the President said it was like having a tooth pulled. 
But it was necessary to turn things around.
    But the key issue is what you said, Mr. Secretary: Now what 
are we going to do to get the money back? You have a proposal 
on the table to make sure that AIG and the financial industry 
that got that money from the taxpayer has to pay back every 
cent.
    So I hope our colleagues on the other side of the aisle 
will work with us. Because when we passed the Wall Street 
accountability bill here in the House, we had a provision to do 
that, and we didn't get a vote from a single Member on the 
other side. So this discussion is very healthy.
    Mr. Secretary, as I leave, I just ask you to get back to me 
on a proposal to establish a financing authority for green 
energy. It is an area we have to invest in. I think there were 
some promising ideas in the President's budget to create a $4 
billion infrastructure innovation fund. I hope we can focus 
that on clean energy initiatives. There was a provision in the 
House energy bill to do that. I look forward to a conversation 
with you on that.
    Chairman RANGEL. Mr. Davis of Kentucky.
    Mr. DAVIS OF KENTUCKY. Thank you, Mr. Chairman.
    Mr. Secretary, I appreciate your being here today.
    I would like to continue our discussion where we left it 
off last February regarding LIFO, last-in, first-out 
accounting. I think there is a misunderstanding in much of the 
economic world on the role of this. It is not a loophole or tax 
shelter. It was actually started during the Great Depression.
    And speaking of turning the clock back, I hear a lot of 
references from the other side about the Roosevelt 
Administration, much of which--his legislation was ruled 
unconstitutional. In fact, the domestic agenda got shut down by 
the Senate as a result of overreach.
    My concern here, in particular, if we want to create jobs 
in manufacturing, repeal of LIFO creates many challenges. It is 
a well-established practice. I think my colleague, Congressman 
Thompson, rightly pointed out that we are on a different 
standard. Our foreign competitors do not have this. This is one 
small advantage because of the great disadvantage American 
business does have in international competition. How do we 
compete with the Chinese with our average rate being around 40 
percent and theirs about 12?
    Here is the question: In industries like distillery and 
aerospace, where you have to set that inventory in many cases 
for years and then accrue it at a cost dramatically higher, you 
know, you would raise taxes by $60 billion effectively, but at 
our end, for example, in my State, it would--actually, those 
are your numbers, $59.1 billion I believe is the exact number. 
In this downturn, I can see it very clearly killing jobs, 
reducing investment and risk, where that is already a challenge 
now.
    Congress rejected the proposal to repeal it last year. You 
brought it back to us. You told me there was a difference of 
opinion on that, but we have very broad bipartisan support to 
keep it. I was wondering if you would comment on where you see 
the compelling reason to repeal this?
    Secretary GEITHNER. Congressman, you made the case against 
it very well, and I understand the concerns against, but we 
think it is reasonable policy. Again, we are following the lead 
of many Members on this Committee who have proposed this in the 
past. I would be happy to talk to you or respond in writing and 
try to walk through what its impact might be and what its 
rationale is.
    But we thought it was good policy back then. We still think 
it is good policy. I understand the concerns you raised. I know 
not everybody agrees. And that is how this process works. We 
get to sit down and look at these proposals and figure out what 
is going to make the most sense.
    Mr. DAVIS OF KENTUCKY. Well, just looking at it as a 
turnaround, and there was this discussion that I have heard, of 
this drumbeat--I am waiting for President Eisenhower to be 
blamed, since we are attacking Republican Presidents on 
infrastructure. But----
    Secretary GEITHNER. Well, I don't think LIFO caused the 
crisis. I don't think it----
    Mr. DAVIS OF KENTUCKY. No, but I think we are calling for 
bipartisanship and then making endless attacks on things that, 
frankly, are pointless from a political standpoint.
    I put this in light of a corporate turnaround. When you go 
into a failing plant, and I have done that before, the one 
thing that you never do is hurt the things that are actually 
maintaining financial stability and put further burden to 
increase costs when you are trying to take cost out of the 
process.
    All I could say is, when you come in with a $160 billion 
deficit and condemn that, and then we have over a $1 trillion 
deficit, if I took that before a board of directors, I would 
hear the words from that show ``The Apprentice,'' ``You're 
fired.'' And that is what the American people are going to do 
if we keep this out-of-control spending.
    Secretary GEITHNER. I don't think metaphors capture what we 
are facing.
    Chairman RANGEL. Ms.----
    Secretary GEITHNER. Could I say one thing, Mr. Chairman?
    But I think you said an important thing. A failing company, 
we got a turnaround problem. Now, I don't think we have a 
failing economy. We have huge strength across this country, a 
lot of innovative, dynamic, strong businesses. But we have a 
turnaround problem. And we are beginning to make some progress 
turning it around.
    And, again, we would like to see if we can find ways that 
work together that will make it more likely we get this economy 
back on track, we repair the damage, repair the wreckage, and, 
as we grow, we do so with more jobs.
    Chairman RANGEL. Ms. Schwartz from Pennsylvania.
    Ms. SCHWARTZ. Thank you, Mr. Chairman.
    And thank you, Secretary.
    I appreciate your comments. I think my colleagues on this 
side of the aisle made it very clear, and I think some 
concession on the other side of the aisle, that in fact this 
Administration did inherit a financial mess, both in the 
economy and, of course, for our Federal budget. So, thank you 
for your comments and clarifying both the reality of what we 
inherited, but also how we are going to go forward to really 
remedy all we can do to actually stimulate the economy and job 
growth.
    I particularly appreciate the focus in the budget on small 
business and small business lending--we have all heard that 
from our businesses--and also the focus on the deficit, the 
pay-as-you-go, the commission, and the fact we are trying to 
balance this, what do we do to restore stability, which we have 
already done, in the economy, the action that the 
Administration and this Congress has already taken, and what we 
are going to do going forward.
    I wanted to ask something that hasn't been asked yet, and 
that is potentially some agreement in a bipartisan way, and 
that is on the issue of helping encourage Americans to save, 
particularly to save for retirement.
    I think there were some comments from both sides saying we 
have to act more like families do. But the fact is a lot of 
American families got into serious trouble by borrowing more 
than they could repay, and it is true the Federal Government 
did that in the previous Administration, as well. But we don't 
always make it very easy to save.
    One of the things that happened during this terrible 
recession we are in is that, in August, Americans started to 
save again. But it isn't easy. It is challenging for families 
that are facing very difficult financial times. And it is, we 
know, made easier when you can save at work, save through your 
employer. Seventy-eight million working Americans do not have 
any kind of retirement plan or savings plan at their workplace.
    What I really want to ask you is the proposals that the 
Administration has put forward, both to encourage small 
businesses to--really, they can't afford real retirement 
savings--set up 401(k)s and make that easier and less costly 
for small businesses, and even for those small businesses that 
don't choose to do a 401(k), to do some kind of automatic 
savings for their employees.
    I guess all of us know that money we haven't seen that we 
put away adds up over time. I encourage all of my young 
staffers to do that, and many of them do.
    But this is really important, and I think it is something 
we can all agree with in a really bipartisan way.
    Secretary GEITHNER. The most important thing we can do----
    Chairman RANGEL. Let me tell you the problem that we have 
here. We have 10 Members that have not had an opportunity to 
inquire, and we got about 10 minutes to get to the floor. For 
those Members that want to stay, we can divide that time up to 
1 minute apiece or, at the 2 o'clock hearing, give priority to 
those people who have not made inquiry. So who would want to 
wait until 2 o'clock so I can bypass them?
    Okay.
    Ms. SCHWARTZ. I will close by thanking you and look forward 
to working with you on those proposals.
    Secretary GEITHNER. I would be happy to respond in writing 
on those proposals.
    Chairman RANGEL. Mr. Reichert.
    Mr. REICHERT. Do I have 1 minute, or do we have time for 3 
minutes?
    Chairman RANGEL. One minute, unless you prefer to come 
back.
    Mr. REICHERT. Mr. Secretary, you and I had an exchange last 
year regarding trade. I just want to go back to that very 
quickly. From 1995 to 2007, we did have a double in our U.S. 
exports, but there were nine trade agreements passed at that 
time. The President has said that he wants to double our 
exports. We need to have these trade agreements passed.
    Do you support the free-trade agreements, the concept of 
free trade?
    Secretary GEITHNER. Oh, absolutely. Yes.
    Mr. REICHERT. Do you support the Korean agreement, the 
Colombian agreement, the Panamanian agreement? Yes or no? Do 
you support those agreements, having trade agreements with 
those countries?
    Secretary GEITHNER. We support having strong trade 
agreements. Open markets for U.S. exporters are fair for 
American business.
    Mr. REICHERT. Mr. Secretary, do you believe that trade 
creates jobs?
    Secretary GEITHNER. I do.
    Mr. REICHERT. Do you believe we are losing jobs by not 
passing the trade agreements? Yes or no?
    Secretary GEITHNER. I think we can create more jobs if we 
expand exports.
    Mr. REICHERT. Mr. Chairman, my time is not up.
    Chairman RANGEL. Your minute has expired.
    Mr. ETHERIDGE. Thank you, Mr. Chairman.
    Mr. Geithner, thank you for being here. And put me in the 
category of those who support the HIRING Act tax credits. I 
have introduced a bill similar to what the President has. It is 
a little bit different, broader. But for a State that has 11.2 
percent unemployment, higher than the national average, we are 
on board.
    Let me ask you--and I have talked to my chambers. I was at 
two of them the other night, Vinson and Erwin. They are tickled 
to death, and they want to see something happen. These were the 
Chambers of Commerce.
    Congressman Rangel and I introduced a tax credit bill for 
school construction in the Recovery Act, but the market for 
those bonds has been slow to develop because of the financing 
side of that issue, and I know you are working on that. Can you 
give us some idea of where the guidance is?
    And second, the President's budget includes the America--
Buy America Bonds Act, and I hope you will look at that for 
qualified school construction bonding as well, because I think 
these are ways to put a lot of people to work very quickly.
    Chairman RANGEL. Ms. Berkley.
    Ms. BERKLEY. Thank you, Mr. Chairman.
    It is lovely to see you again, Mr. Secretary. I am going to 
do this in 30 seconds and then get a response.
    My district is in a world of hurt. I have over 13 percent 
unemployment. My building trades are 50 percent unemployed. I 
have the highest mortgage foreclosure rate in the country. I 
have a service-oriented economy. I have been pushing for 100 
percent deductibility of meals tax and a spousal travel 
allowance to get people back to work. What are you going to do 
to help me?
    Secretary GEITHNER. You have been a passionate, eloquent 
advocate for those two proposals.
    Ms. BERKLEY. And I have more.
    Secretary GEITHNER. And I understand you feel strongly 
about them, and I will be happy to talk to you and work with 
you on how best we can meet that objective.
    And you are right to remind everybody that there is a huge 
amount of pain still across this country, and it is not 
captured in the national numbers. And there are parts of the 
country where unemployment is much, much higher, where job 
loss--where foreclosure is much, much higher, and that is why 
we have done everything we have as quickly as we have to put a 
floor under this recovery and help reinforce recovery. You are 
right about it, and I am glad you are reminding people about 
it.
    Ms. BERKLEY. Well, thank you.
    One other thing. We keep talking about small businesses. 
Don't forget my big developers; they can't get a loan either.
    Chairman RANGEL. Mr. Yarmuth.
    Mr. YARMUTH. Thank you, Mr. Chairman.
    Mr. Secretary, thank you very much for your presentation. I 
want to spend my minute reinforcing my colleague Mr. Davis' 
comments about LIFO. In the Commonwealth of Kentucky, we have 
an industry which is $3 billion worth of our gross State 
product. I know you want to talk about expanding exports. We 
export bourbon to 126 countries. It is a growing part of the 
economy. It is one of the manufacturing sector's growing 
segments. Overall manufacturing is down 20 percent in Kentucky. 
The distilling industry is up 6 percent. This proposal would 
represent an existential threat to many of our distilleries, 
and it is a significant concern.
    I yield back, Mr. Chairman.
    Chairman RANGEL. Thank you.
    Mr. Secretary, I hope we can get together with a bipartisan 
discussion of the recommendations made by the President and 
you. In any event, we look forward to working with you outside 
of just this formal hearing to see whether we can iron our 
differences. And we will need your help with the Senate. It 
doesn't really make sense for us to go through all of this only 
to find out that they have problems with our product.
    So let me thank you for being with us. I look forward to 
being with you again soon.
    This hearing stands adjourned until 2 p.m. this afternoon.
    [Whereupon, at 12:04 p.m., the Committee was adjourned.]

                                 
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